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Collections and My Credit Score

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How Does a Collection Notice Affect My Credit Score?

Credit scores (also known as FICO scores) are based on several factors contained in credit reports, which help creditors and lenders determine the risk of extending credit to prospective borrowers. When unpaid amounts become delinquent, creditors tend to pass these bills to collection agencies, who attempt to get the debtor to pay the debt in exchange for receiving a percentage of the amount recovered. Until the debt has been recovered, these collection notices are reflected negatively in a credit report, resulting in a low credit score.

What Can a Low Credit Score Do?

A person that has a low credit score:

  • Indicates they are a high risk of default to creditors
  • May pay a higher interest rate for loans
  • May have a tougher time getting a credit approval

What Can I Do to Raise My Credit Score If I Have a Collection Notice?

To control debt and improve credit scores, you should try to settle the amounts owed to collection agencies. Since the agencies earn a percentage of monies collected, negotiating payment(s) benefits both parties because that way the debt becomes settled and the agency still gets some money, rather than never getting any money. Once you have negotiated a settlement and paid off that settlement, you can request documentation from the collection agency to submit to the 3 credit bureaus, and request that these reporting agencies remove the negative items from your credit report.

How Can a Lawyer Help?

A skilled lawyer is extremely helpful in negotiating with agencies to work out a payment that you can afford. Also, a lawyer can help protect your rights and interests if the collection agency that you are dealing with is particularly aggressive.  Finally, a lawyer can ensure that the collection agency fulfills their part of the agreement that you have with the agency when settling your debt.

Photo of page author Kristen Johnson

, LegalMatch Legal Writer

Last Modified: 07-10-2014 04:38 PM PDT

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